Here’s how Samsung made an obscene amount of money last quarter
You may have heard by now that Samsung made an obscene amount of money in the quarter ending June 2017. The company has broken its previous operating profit record and has become the world’s most profitable technology company in Q2 2017.
Samsung has earned $12.67 billion in operating profit on revenue of $54.7 billion, more than any other company. The operating profit has surged 72.7 percent compared to Q2 2016. This begs the question, how has Samsung been able to achieve this?
The chip business continues to be a cash cow for Samsung, it is the biggest contributor to Samsung’s bottom line. The semiconductor business has posted consolidated revenue of 17.58 trillion won ($15.7 billion) for the quarter and an operating profit of 8.03 trillion won ($7.20 billion) up from 2.6 trillion won ($1.8 billion) in Q2 2016.
Consistently high demand for DRAM and NAND chips have pushed up prices which mean wider profit margins for Samsung. The company has taken full advantage of its position as a leader in the DRAM and NAND market to grab money with both hands.
Samsung’s System LSI Business, which is part of the chip division, saw its earnings improve quarter-over-quarter due to increased sales of processors for flagship smartphones and steady sale of 14nm processors for mid-to-low-end smartphones. Image sensor sales have also contributed to the earnings.
Samsung’s display panel business remained in the green as well this past quarter, posting 7.71 trillion won ($6.9 billion) in revenue and 1.71 trillion won ($1.53 billion) in operating profit, up both quarter and year-wise.
The robust performance was driven by increased sales of premium OLED displays and high-end large LCD panels. The earnings for Samsung’s OLED business improved quarter-over-quarter due to increased shipments of premium flexible displays for flagship smartphones.
All eyes were on the official figures from Samsung’s Mobile Division to get a sense of just how much the Galaxy S8 has contributed to the company’s bottom line. While strong sales have increased earnings significantly quarter-over-quarter, operating profit is actually down 4.7 percent.
Samsung’s Mobile Division reported revenue of 30.01 trillion won ($26.9 billion) for the quarter, up both quarter and year-wise. However, tighter margins due to rising component prices have restricted profitability. Operating profit for the quarter came in at 4.06 trillion won ($3.6 billion) compared to 4.32 trillion won ($3.8 billion) in the same period last year.
Samsung says that while the performance of its premium smartphones has been very strong, the company’s total smartphone shipment levels remain at a similar level compared to Q1 2017 due to decreased sales of mid-to-low-end smartphones.
The Consumer Electronics Division, which includes Samsung’s Visual Display and Digital Appliance businesses, reported revenue of 10.92 trillion won ($9.7 billion) and 0.32 trillion won ($287 million) in operating profit, both down year-over-year.
Samsung says that the overall TV market demand declined in the second quarter due to increased demand in 2016. A slowdown in the Chinese market has also impacted the bottom line. Increase panel prices have also hit the profit margins.